US tax penalty if cancelling Obama care as an expat?

[ding]

Is there a tax penalty from the IRS in America if I cancel my healthcare?

 

We permanently moved to Thailand May 30, 2022. I have insurance with AIA.

I've paid for coverage through November just in case (my Thai wife has cancer).

 

I can't find a clear answer on the IRS site for 2021/2022 tax penalty if I cancel insurance while living abroad.

[sqwakvfr]

Canceled my ACA policy back in 2017 and no penalty.  I have had the same CPA for 35 years who files my tax returns and he said their is no issue because I put my Thailand address on my tax returns.  

[jaywalker2]

No, there's no longer any penalty for for not buying health insurance. The Republicans did away that just after Trump took office.

[Etaoin Shrdlu]

AIA Thailand is a life insurance company and they will only provide medical insurance benefits as an extension of a life insurance policy. Most life policies sold by AIA in Thailand are whole life policies that have a cash value.

 

Since it appears that you are interested in tax compliance, you might wish to look into the US tax treatment and reporting requirements surrounding non-US whole life insurance policies.

[biervoormij]

You can look at the link https://www.healthcare.gov/taxes-2017/no-health-coverage/.

 

It has the following line about the penalty.

"This applies for plan years 2018 and earlier. (The fee for not having health insurance no longer applies.)"

 

 

[ding]

1 hour ago, Etaoin Shrdlu said:

AIA Thailand is a life insurance company and they will only provide medical insurance benefits as an extension of a life insurance policy. Most life policies sold by AIA in Thailand are whole life policies that have a cash value.

 

Since it appears that you are interested in tax compliance, you might wish to look into the US tax treatment and reporting requirements surrounding non-US whole life insurance policies.

Thanks Etaoin. I'll look into non-US whole life insurance US tax requirements. As part of my medical insurance AIA did required me to get 100K Baht life insurance for 6,419B per year.

I didn't know why they required me to sign a W9 when they were never going to pay me a life insurance benefit... my wife maybe but not yet! They didn't ask my wife (beneficiary) to sign.

 

AIS repeatedly tried to make me sign an IRS tax doc for corporations that said right at the top; NOT TO BE USED FOR INDIVIDUALS.

 

Kasikorn Bank did the same thing but they refused to acknowledge I am not a corporation. I assume many Americans just sign because I was the first to resist each time.

Edited November 25, 2022 by ding

[ding]

2 hours ago, biervoormij said:

You can look at the link https://www.healthcare.gov/taxes-2017/no-health-coverage/.

 

It has the following line about the penalty.

"This applies for plan years 2018 and earlier. (The fee for not having health insurance no longer applies.)"

 

 

Thanks voormij, I did see that but I was looking for something post 2018.

I couldn't find anything definitive for 2021/22 and beyond. I saw somewhere that the penalty was still there but the dollar amount was set at $0.

Knowing politics I figure that can change!

[Etaoin Shrdlu]

42 minutes ago, ding said:

Thanks Etaoin. I'll look into non-US whole life insurance US tax requirements. As part of my medical insurance AIA did required me to get 100K Baht life insurance for 6,419B per year.

I didn't know why they required me to sign a W9 when they were never going to pay me a life insurance benefit... my wife maybe but not yet! They didn't ask my wife (beneficiary) to sign.

 

AIS repeatedly tried to make me sign an IRS tax doc for corporations that said right at the top; NOT TO BE USED FOR INDIVIDUALS.

 

Kasikorn Bank did the same thing but they refused to acknowledge I am not a corporation. I assume many Americans just sign because I was the first to resist each time.

Since the FATCA rules came into force, foreign financial institutions, including life insurance companies, are required to report Americans' accounts to the IRS. This includes whole life policies. There may be thresholds below which some financial institutions don't report Americans' accounts, but I'm not sure about this. 

 

You were probably asked to sign the W9 because you are the owner of the policy. Your wife may be the beneficiary for the death benefit, but you likely own the policy and the cash value in the policy belongs to you. 

 

My understanding is that a whole life insurance policy's cash value counts towards the $10,000 threshold for reporting under FINCEN 114 forms (FBAR) and the policy itself is considered a financial account just like a bank account.

 

When it comes to taxes, I think the increase in the cash value that is attributable to earnings is reportable as income when filing taxes. There may be some difficulty in determining how much of the increase in the cash value is due to premium contributions (probably not taxable) and how much is due to investment income (taxable). Not all life insurers will split this out, making exact reporting difficult. 

 

I am not a tax professional, so you would need to seek expert advice if you have concerns. The above is only my understanding and may not be entirely correct or complete.

[biervoormij]

3 hours ago, ding said:

Thanks voormij, I did see that but I was looking for something post 2018.

I couldn't find anything definitive for 2021/22 and beyond. I saw somewhere that the penalty was still there but the dollar amount was set at $0.

Knowing politics I figure that can change!

On the search I did I put in 2017 since I found that that is the year that congress removed the penalty but https://www.healthcare.gov/taxes-2020/no-health-coverage/ says the same thing. Maybe a link about 2023 would make you feel better.  https://help.ihealthagents.com/hc/en-us/articles/115001888334-What-is-the-penalty-for-not-having-health-insurance-in-2023-

 

I did not pay a penalty for 2020 or 2021 and there was no question about it in turbo tax.

 

If you did have Obama care in one of these years you will still need to file a form 8962 on your returns.

 

Not related to health insurance but don't forget to file fincen 114 if you brought in the 800K retirement requirement into Thailand. I think it is required for any account over 10K USD outside the US.

 

I don't think you owe any penalty but hope you find something that sets your mind at ease.

[ding]

10 hours ago, biervoormij said:

file fincen 114 if you brought in the 800K retirement requirement

Thanks biervoormij. It's good to hear TurboTax works for our situation -  I don't want it to miss anything because I probably would! It must pick up on a foreign address and omit the ACA tax penalty question.

 

In my case, since I kept our health insurance active for my wife, I guess I'll pay this last month. My state's program wants me to re-up in November, so I will and then cancel for January 2023.

 

I made notes on the info on this thread, very helpful. ????